Brexit lesson: Governance matters

The fundamental lesson of Brexit is: good governance matters. There are several, mounting examples of this maxim at home and around the world.

To begin with the Brexit vote itself, Prime Minister David Cameron clearly grossly misjudged his electorate’s frustration with what were perceived to be increasing intrusions of “Brussels” (shorthand for the EU) in British life. These were telescoped in to particularly sharp focus by the migrant crisis, which for a number of complex factors, resulted in Brussels having to recommend (it could not insist on) quotas of migrants for each EU member state to accept. Though not truly an example of legislation from Brussels, it alarmed and angered many Britons – not to mention just about every other electorate in the EU – raising fundamental questions about the benefits vs. liabilities of membership in the EU. Had the EU itself handled the migrant crisis differently – say by providing substantially more aid at the point of origin of migrants or creating a more orderly refugee resettlement program – the panic of a “flood of immigrants” might have been defused.

In the US, the same frustrations about ineffective government are largely fueling the up-ending of the American political scene by both Bernie Sanders and Donald Trump. The one extremely important thing that both of these astonishingly popular politicians demonstrate is how angry the electorate is with the status quo, including a government that is increasingly seen to be non-functioning, arrogant, and distant. On everything from the inability of the executive branch to actually execute on a number of seemingly rather simple functions (like programming Healthcare.gov’s Web site) to larger overall government failures, like what is now almost a proudly dysfunctional Congress, Americans are angry and fed up with their government.

On the global scene, there is an interesting thing happening with the new Asian Infrastructure Investment Bank (AIIB), spearheaded by China as a clear challenge to the World Bank. The “clean, lean, green” AIIB (as its President Jin Liqun continues to describe it), is specificially designed to remedy many of the problems that are widely acknowledged to plague the World Bank. Under the leadership of the American-appointed Jim Yong Kim, the Bank has gone from being slow and bureaucratic to being all but dysfunctional. Its procurement and contracting policies – the primary way it actually acts – are modeled after the failed similar policies of USAID, with all the same liabilities: little regard to achieving actual development goals, poor reputation for organizational efficiency, paralyzing bureaucracy, and a tin ear to any calls for reform.

The common thread tying all of this together is a lack of good management of public bureaucracies. If the same were happening in the private sector, “activist shareholders” and/or the market itself, would discipline boards and executives to make changes or be replaced. That external discipline is absent in the public sector. The only place it can really come from is political leadership of individuals who actually recognize, and then can solve, the growing management problems that afflict governmental institutions. This week’s news is a wakeup call that we ignore good governance at our peril.